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Newell Rubbermaid Inc. (NYSE:NWL) is scheduled to release its fourth-quarter 2010 results on Thursday, January 27. The Zacks Consensus Estimate for the quarter is pegged at 32 cents a share.

Third Quarter Performance
Newell Rubbermaid logged a strong 10.5% growth in third quarter 2010 earnings, climbing to 42 cents a share from 38 cents a share in the year-ago quarter. Earnings also edged past the Zacks Consensus Estimate of 41 cents. Including special items, earnings per share came in at 9 cents. The strong quarterly performance was mainly attributable to increased core sales, improved productivity and better working capital management.

During the quarter, Newell recorded a modest 2.6% year-over-year jump in net sales to $1,487.3 million, marginally behind the Zacks Consensus Estimate of $1,494.0 million. Core sales of the company improved 5.7% for the quarter primarily benefiting from improved market share, distribution wins and strong demand from the Latin American and EMEA (Europe, the Middle East and Africa) markets.

Fiscal Year 2010 Guidance
Newell expects its top line in fiscal 2010 to increase in the range of low-to-mid single digit and core sales to augment in the mid single-digit range. The company maintained its 2010 adjusted earnings in a range of $1.40 to $1.50 per share. The high end of the guidance is in consonance with the Zacks Consensus Estimate of $1.50 per share, which has remained static over the past 2 months.

Agreement of Analysts
In the last 30 days, out of the 16 analysts covering the stock, none of the analysts moved their estimates in the upward direction while one moved in the downward direction for the fourth quarter and fiscal 2010. In the last 7 days, no analysts revisited their estimates keeping the consensus unchanged.

Magnitude of Estimate Revisions
With no earnings revisions by the analysts in the last 7 days and 30 days, the Zacks Consensus Estimates for the fourth quarter and fiscal 2010 remain unchanged at 32 cents and $1.50 per share, respectively.

Surprise History
With respect to earnings surprises, Newell showed a favorable trend in the last four quarters. The company has recorded positive surprises in the trailing four quarters with a low of 0.0% and a high of 38.9%. On an average, the earnings surprise was a positive 19.1%. Based on the current flow, we expect the company to come up with healthy results in the upcoming quarter.

Our Recommendation
Newell Rubbermaid is one of the leading manufacturers of home and office products in the U.S. The company also possesses a strong portfolio of well established brands, such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Based on its strong brand portfolio, Newell Rubbermaid can expect robust earnings, should the market scenario change for the better.

The company is in the midst of a multi-year global restructuring program aimed at improving productivity, reducing overheads, streamlining distribution and transportation processes and exiting low-margin product categories. The program is aimed at realizing annualized savings in excess of $200 million. Consequently, Newell Rubbermaid can expect a steady improvement in its bottom-line in the future.

Newell Rubbermaid faces intense competition from numerous manufacturers and distributors of consumer and commercial products, such as Jarden Corp. (NYSE:JAH), Fortune Brands Inc. (FO), Cooper Industries plc (CBE), and Avery Dennison Corporation (NYSE:AVY).

The company is heavily dependent on a handful of customers, which includes large discounters, department stores, home centers, warehouse clubs and office superstores. This considerably reduces Newell Rubbermaid’s pricing power against these giant retailers, thereby exerting pressure on margins and limiting profitability.

Due to its exposure to international markets, Newell also remains prone to currency fluctuation. The weakening of foreign currencies against the U.S. dollar may require the company to either lower prices or book lower profit margins in locations outside the U.S.

Newell Rubbermaid currently has a short-term Zacks #3 Rank (Hold) rating and a long-term Neutral recommendation

Source: Newell Rubbermaid: Earnings Preview